Credit Cards: A New Breed Credit Cards Charge After Consumers

The new generation of credit cards: Do they represent the first major enhancement of plastic money or are they some dogs trying to take a bite out of Joe Consumer`s wallet?

Credit card issuers, including banks, oil companies, insurance firms and retailers, are entering the market with a barrage of new cards bundled with product and service discounts, savings accounts and lofty loan rates.

Five years ago, the average bank charged no annual fee for credit cards and 17.4 percent interest. That`s when prime interest rates hit an all- time high of 21.5 percent.

The prime rate runs 9.5 percent today, but bank credit card rates average 18.7 percent, according to the Federal Reserve Board. And annual fees range from $15 to $50.

The profit margins are so wide that Congress is starting to consider a national ceiling on credit card rates.

Credit card issuers, meanwhile, are venturing far from home to develop new markets.

A total of 20 out-of-state banks are soliciting credit card customers in Florida, said William L. Sutton, president of the Florida Bankers Association. Yet not one of the long-distance card issuers is offering rates for less than 18 percent, the limit that Florida law imposes on institutions headquartered in the state.

For consumers, the bottom line is a series of high-cost alternatives, said John Bull, president of Pompano Beach-based National Bankcard Corp., which processes credit card transactions for retailers across the nation.

``I don`t see these new cards coming on the market as being enhancements at all,`` Bull said. ``They`re just different.``

Credit card issuers, however, point to a number of ways they help their customers save money.

Some credit cards provide customers with discounts on products and services. Others are trying to win new customers by temporarily eliminating annual fees. And still others are bundling credit cards with bank checking accounts, savings accounts and access to automatic teller machines (ATMs).

Citicorp of New York is using its credit cards as one of several ways to slip into the Florida financial services market despite the ban on nationwide interstate banking, Sutton said.

``It`s kind of like the camel that says, `I just want to put my nose inside your tent on this cold desert night,` `` Sutton said. ``Before you know it, he`s all the way inside of the tent.``

A Citicorp spokesman did not disagree with Sutton`s assessment. In fact, the banking company is offering the Citibank Financial Account -- which provides a MasterCard or Visa card tied to bank accounts -- only in markets where it cannot offer full-service banking. The account costs $4.41 per month.

This month in Miami and West Palm Beach, Citicorp started offering another product, CHOICE, which has no annual or monthly fee. The product can be used as a credit card at participating merchants and to access a money-market account through Publix supermarket ATMs.

In September, a Sears, Roebuck & Co. subsidiary began test marketing the Discover card, which similarly offers banking and credit services. The Discover card, available in Atlanta and San Diego since September, is scheduled to be marketed nationwide next spring.

However, Sears, the nation`s largest retailer, faces challenges that a card bearing the emblem of Visa or MasterCard does not. While Visa and MasterCard are the most universally accepted cards, some merchants reportedly are refusing to honor Discover cards.

``Because they (Sears) are a retailer, they have met with resistance from major retailers who view them as a competitor,`` said John Hughes, a vice president of Citicorp in Atlanta.

Paul Marrone, a spokesman for the Discover card, denies that poses any difficulty. He noted that the Radio Shack chain, Dayton-Hudson Corp. stores and General Tire are among the retailers which have agreed to accept the Discover card since merchant marketing began this summer.

Of the new cards, those created by Citicorp, the nation`s largest bank holding company, have the best odds of surviving and of creating problems for Florida banks, according to National Bankcard`s Bull.

``Whether you are a big bank or a little bank, Citicorp footsteps can be heard everywhere,`` Bull said.

``If a (Florida) bank continues to provide a full array of services to the community, I don`t see them being hurt by these national services,`` Bull said. Bankers know their customers personally and are conveniently located, he added.

``It`s awfully hard to replace those kinds of relationships with the mail and electronic services,`` he said.